We Buy Houses breached Australian Consumer Law with 'buy a house for $1' claim, judge says

A businessman who claimed his clients could "buy a house for $1" engaged in misleading and deceptive conduct, and contravened the Australian Consumer Law.

Rick Otton's company We Buy Houses (WBH) had a turnover of more than $20 million.

Between January 2011 and June 2014, 3,400 people attended free seminars, 2,000 paid to attend a boot camp to learn more information, and 700 did a more expensive course with mentors.

Today, however, a Federal Court Judge found Otton and WBH broke the Australian Consumer Law.

Justice Jacqueline Gleeson concluded there was no evidence that the strategies spruiked by the sole director and his company could enable a consumer to buy a house for $1 and that the seminars WBH students attended were an "expensive waste of time".

"The headline 'how to buy a house for $1' indicates that [WBH and Otton] were directing their efforts principally towards people who were not property rich, but who would be attracted to the idea that they could make money from property without having to pay a significant amount for it," Justice Gleeson said.

"The message is sensational. It is designed to attract the attention of consumers who do not have sufficient financial resources to buy a house using mainstream bank finance."

WBH boot camps 'an expensive waste of time'

The Australian Competition and Consumer Commission [ACCC] had alleged that WBH's further claims that a consumer could buy a house without needing a deposit, bank loan or experience, start making profits immediately, and create wealth were also misleading and deceptive.

Justice Gleeson's judgement said consumers enticed by WBH were given a variety of strategies and tips to achieve property ownership — some of which included "rent-to-buy", a "sandwich lease option" involving a middleman, and "sweat equity" option, where the buyer carries out renovations in lieu of paying a deposit.

Would-be investors would be given some information at the initial free session, then delivered more if they paid $3,000 to attend the boot camp and $26,000 to attend mentoring workshops.

"For ordinary consumers seeking how to achieve the outcomes stated ... the free seminars were a waste of time," Justice Gleeson said.

"For those ordinary consumers the boot camps and the Go Direct programs were an expensive waste of time."

Justice Gleeson accepted that some of the WBH strategies were theoretically possible, but added there was no evidence they had been used by its students successfully.

None of WBH's most successful students, known as "big kahunas", provided evidence to the court to show what they had claimed to have achieved, and while a number of testimonials were shown to the court, the judge said there was no evidence of the claims in them.

ACCC witnesses talk of failures

The ACCC called nine consumers as witnesses to describe how they had been to WBH sessions but never achieved success by implementing what they learned.

WBH's lawyers said people who could not make the strategies work did not persist, applied the strategies to commercial properties, tried to buy properties that were too expensive, or tried to combine strategies against the advice provided.

During court proceedings Otton's own investment success and the representations he made about it were questioned extensively.

"Despite claiming that Mr Otton had been successful financially "in following these ideas and strategies", there was almost no evidence that [Mr Otton and WBH] had used the strategies, let alone used them to make money," Justice Gleeson said.

"There was no evidence that the respondents had bought a property since 2006.

"I conclude that, in reality, the respondents' strategies do not and cannot enable a consumer to buy a house without needing a deposit, bank loan or real estate experience."

The ACCC instituted proceedings against We Buy Houses and Otton in March 2015 following a coordinated investigation with New South Wales Fair Trading.

"We Buy Houses sold a lie to vulnerable consumers that home ownership could be achieved easily through strategies taught by Mr Otton," ACCC Deputy Chair Delia Rickard said.

"Today's judgment sends a strong message to 'property spruikers' that they must not make false or misleading representations about the success and profitability of their 'wealth creation strategies' to induce consumers to pay significant sums to learn about them."

Otton 'considering findings'

In a statement, Otton said he was pleased that the court accepted it was inconceivable that an ordinary or reasonable person would take the phrase "How to Buy a House for a $1" at face value.

He also pointed to the fact that the ACCC did not dispute that it may be possible to buy and sell property using one of the techniques he promoted, vendor finance.

"As I so often explained, the technique was designed to help homeowners who can no longer pay home loan repayments and with the help of a turnaround specialist, ensures that they do not become mortgagee sale roadkill," Otton said.

"We accept Her Honour's findings that insufficient proof was presented to prove how this vendor finance technique can work in practice."